Ticking Time Bomb

The President's Big Beautiful Bill could possibly be beautiful and is certainly is big; but not simultaneously.  Setting a record for an all time high in deficit spending is the big part and that is hardly beautiful.  It is an economic time bomb that could eventually bring down our rather decent credit rating and our children's economic prospects along with it.

That is hardly a beautiful prospect.

This is spending on the scale of a wartime economy.  Last time I looked, we're not at war; a real one anyway.

There is momentum in the Senate to stop the process, at least "until the president gets serious about spending reduction and reducing the deficit," said Sen. Ron Johnson (R-WI). Johnson's concerns come as a number of GOP lawmakers, including Sens. Rand Paul (R-KY) and Josh Hawley (R-MO), have indicated they will not back the bill in its current form.  

The administration and the house are whistling past the graveyard; the Senate has an opportunity to take a whack at the House Pinata and perhaps bring some sanity to this debauchery of spending.  

I hate to sound like a broken record and say I told you so; but the solution to our budget deficit is the 800 pound gorilla sitting with us in the room.  Namely, Social Security, Medicare and Medicaid.  They need to be reformed.

Of course, that is a heavy lift and hard work.  The administration seems loathe to roll-up their sleeves and work hard.  And if Trump's party loses some or all of its power in the mid-terms the opportunity to take it on later will have passed.

Meanwhile we have reality television cage-match politics.  We are living in interesting times. 

The Big Beautiful Bill

The Big Beautiful Bill is back.

In the run-up to the election candidate Trump and Congressional Republicans made multiple promises to cut multiple taxes for multiple constituencies.  They cannot deliver on all of it as a consequence of a $4.5 trillion limit on the amount of money the federal budget can devote over the next decade to tax cuts. So, if you're looking forward to tax-free tips, tax-free Social Security, tax-free overtime pay and state and local tax (SALT) deductions something is gonna give.

First-off, if the GOP-controlled Congress wants to simply reauthorize the last round of tax cuts implemented during Trump 1.0 that will account for almost all of the $4.5 trillion cap leaving roughly $300 billion for everything else. 

Secondly, the GOP plan is contingent-upon an additional $2 trillion in spending cuts.  Anything less than that and the tax cuts are jeopardized.

Source: Committee for a Responsible Federal Budget | Not all proposed tax cuts are shown. | By The New York Times

 The non-partisan Committee for a Responsible Government has tallied these estimates for the next decade :

• At least $100 billion not to tax tips 
  

• At least $250 billion not to tax overtime

• At least $550 billion to lower taxes on Social Security benefits

• At least $200 billion to increase the deduction for state and local taxes

The challenge is that the sum total of these promises blows-up the budget.  Sure, Congress could end the subsidy for electric vehicles and scratch together something from that.  The trouble is that's all it is.  Scratch.  Chump change in a voluminous budget.  

Senate Republicans have floated the notion that if Congress simply reauthorize the Trump 1.0 tax cuts it doesn't cost anything. Since the old Trump tax cuts are currently in effect then maintaining the status quo costs nothing.  It is free.  Or at least that is the thinking.  If you consider that really thinking.  Just between you and me I know this brilliant thinking will blow-up the deficit and balloon the debt that any rational economist would tell you is already too large.  But I digress. 

Meanwhile, the debt ceiling looms large.  The tax cuts expire at the end of the year.  Hard deadlines make for hard work.  Time will tell.